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The Monetary Authority of Singapore (MAS) on Tuesday (July 19) announced at its annual review that it clocked a net loss of $7.4 billion for the financial year ended March 31, 2022 - the first time in nine years.
The loss came from lower investment gains, a large negative foreign exchange translation effect, and higher interest expenses.
As a result of the loss, MAS did not contribute to Singapore's consolidated fund, out of which government expenditure is made, for the financial year. It had contributed $1.07 billion in fiscal 2021 and $2.17 billion in 2020.
MAS also said that as at end-March, Singapore's Official Foreign Reserves recorded a net loss of $4.7 billion as investment gains of $4 billion were more than offset by the strengthening of the Singapore dollar, which led to a negative foreign exchange translation effect of $8.7 billion.
The Singdollar strengthened 4 per cent against the British pound, 5 per cent against the euro, and 9 per cent against the Japanese yen, MAS noted.
MAS' total expenditure also increased, to $2.8 billion, due mainly to higher interest expenses on domestic money market operations.
The central bank has been gradually tightening monetary policy since Oct 2021, as inflation continues to rise.
In July, MAS further tightened monetary policy in its second off-cycle move this year.
MAS managing director Ravi Menon said on Tuesday that core inflation is projected to increase to a peak of 4-4.5 per cent in the third quarter this year before levelling off to about 3.5-4 per cent by year-end, much higher than what Singapore is used to.
"If there are fresh shocks to global energy and food supplies arising from the ongoing conflict in Ukraine or a significant overheating of the domestic labour market, inflation may end up being higher and more persistent," he said.
Senior minister and MAS chair Tharman Shanmugaratnam noted that the central bank had tightened monetary policy four times since Oct 2021 to help ensure medium-term price stability, amid sustained growth in the economy.
"These moves should slow the inflation momentum, but cannot fully mitigate the pass-through of higher global inflation, especially in food and energy prices.
"The domestic labour market is tight and some pick-up in consumer services inflation is to be expected. However, MAS expects core inflation to stabilise by the latter part of the year," he said in the report.
Tighter financial conditions, coupled with a squeeze in real incomes as a result of rising prices, will drag on growth, Mr Menon said, adding that it is difficult to estimate the extent of the growth slowdown next year given the complex interplay of multiple factors.
In the second half of this year, slowing growth in the global economy will weigh on Singapore's trade-related sectors, even as the domestic-oriented and travel-related sectors continue to recover.
For 2022, Singapore's economy is expected to grow in the lower half of the 3-5 per cent forecast range.
Amid the uncertain outlook, a silver lining was the expansion in banking, insurance, asset management and payment services that resulted in a 7.4 per cent value-added growth in the financial sector.
Fintech investments hit a high of US$3.9 billion, while the past year recorded a net creation of 4,300 jobs in financial services.
MAS said the banking sector has maintained healthy asset quality alongside strong capital and liquidity buffers.
Industry stress test results also show that banks would have sufficient buffers to weather shocks from an adverse macroeconomic scenario.
Mr Menon said MAS has updated the Financial Services Industry Transformation Map (ITM) for the period 2021-25, and will launch it in a couple of months. ITM lays the blueprint of strategies and initiatives to further strengthen Singapore's position as a regional financial hub.
Household balance sheets are also generally resilient and most should be able to service their loans even in the event of sharp interest rate hikes and income loss.
But Mr Menon warned that there will be "a small segment of households" that may be more constrained by rising interest rates.
The household leverage has remained elevated compared to pre-Covid-19, driven by the growth of new housing loans on the back of a buoyant property market since end-2019.
MAS posts $7.4 billion annual loss, weighed by stronger Singdollar amid soaring inflation
SINGAPORE - Singapore's financial sector went from strength to strength, buoyed by broad-based growth but inflationary pressures, wobbly global growth and global tightening monetary policies have weighed on the central bank's fiscal performance.The Monetary Authority of Singapore (MAS) on Tuesday (July 19) announced at its annual review that it clocked a net loss of $7.4 billion for the financial year ended March 31, 2022 - the first time in nine years.
The loss came from lower investment gains, a large negative foreign exchange translation effect, and higher interest expenses.
As a result of the loss, MAS did not contribute to Singapore's consolidated fund, out of which government expenditure is made, for the financial year. It had contributed $1.07 billion in fiscal 2021 and $2.17 billion in 2020.
MAS also said that as at end-March, Singapore's Official Foreign Reserves recorded a net loss of $4.7 billion as investment gains of $4 billion were more than offset by the strengthening of the Singapore dollar, which led to a negative foreign exchange translation effect of $8.7 billion.
The Singdollar strengthened 4 per cent against the British pound, 5 per cent against the euro, and 9 per cent against the Japanese yen, MAS noted.
MAS' total expenditure also increased, to $2.8 billion, due mainly to higher interest expenses on domestic money market operations.
The central bank has been gradually tightening monetary policy since Oct 2021, as inflation continues to rise.
In July, MAS further tightened monetary policy in its second off-cycle move this year.
MAS managing director Ravi Menon said on Tuesday that core inflation is projected to increase to a peak of 4-4.5 per cent in the third quarter this year before levelling off to about 3.5-4 per cent by year-end, much higher than what Singapore is used to.
"If there are fresh shocks to global energy and food supplies arising from the ongoing conflict in Ukraine or a significant overheating of the domestic labour market, inflation may end up being higher and more persistent," he said.
Senior minister and MAS chair Tharman Shanmugaratnam noted that the central bank had tightened monetary policy four times since Oct 2021 to help ensure medium-term price stability, amid sustained growth in the economy.
"These moves should slow the inflation momentum, but cannot fully mitigate the pass-through of higher global inflation, especially in food and energy prices.
"The domestic labour market is tight and some pick-up in consumer services inflation is to be expected. However, MAS expects core inflation to stabilise by the latter part of the year," he said in the report.
Tighter financial conditions, coupled with a squeeze in real incomes as a result of rising prices, will drag on growth, Mr Menon said, adding that it is difficult to estimate the extent of the growth slowdown next year given the complex interplay of multiple factors.
In the second half of this year, slowing growth in the global economy will weigh on Singapore's trade-related sectors, even as the domestic-oriented and travel-related sectors continue to recover.
For 2022, Singapore's economy is expected to grow in the lower half of the 3-5 per cent forecast range.
Amid the uncertain outlook, a silver lining was the expansion in banking, insurance, asset management and payment services that resulted in a 7.4 per cent value-added growth in the financial sector.
Fintech investments hit a high of US$3.9 billion, while the past year recorded a net creation of 4,300 jobs in financial services.
MAS said the banking sector has maintained healthy asset quality alongside strong capital and liquidity buffers.
Industry stress test results also show that banks would have sufficient buffers to weather shocks from an adverse macroeconomic scenario.
Mr Menon said MAS has updated the Financial Services Industry Transformation Map (ITM) for the period 2021-25, and will launch it in a couple of months. ITM lays the blueprint of strategies and initiatives to further strengthen Singapore's position as a regional financial hub.
Household balance sheets are also generally resilient and most should be able to service their loans even in the event of sharp interest rate hikes and income loss.
But Mr Menon warned that there will be "a small segment of households" that may be more constrained by rising interest rates.
The household leverage has remained elevated compared to pre-Covid-19, driven by the growth of new housing loans on the back of a buoyant property market since end-2019.
